Advisers should be urging their clients to check if any trusts they hold are registered in order to avoid an unintentional fine, WAY Investment Services has cautioned.

Since 2017, all express trusts that incur a UK tax consequence have been required to register online with the Trust Registration Service (TRS). But new legislation designed to combat money laundering means that from 2020 all express trusts will need to register, whether or not they have a UK tax liability.

Express trusts are generally defined as trusts that have been deliberately created by a settlor, as opposed to being created in other ways, such as through a court order or through statute. This description is likely to include discretionary trusts, interest in possession trusts, many types of bare trusts, charitable trusts and employee ownership trusts.

The deadline for registration is also changing, WAY explained. Under the previous rules, the deadline was 31 January of the tax year following the taxable event. As the expanded requirement covers trusts with no tax consequence, the government has said that the link between the deadline for registration and the tax year no longer applies. Instead it has recommended that all unregistered trusts already in existence on 10 March 2020 will need to be registered by 31 March 2021.

For any new trusts created on or after 1 April 2020, the government has proposed that they should be registered within 30 days of their creation. It is also intended that this 30-day deadline will be used for any amendments that need to be made to the trust register data, for example, to update an address or change a trustee.

Currently, trusts that are more than six months past their registration deadline can face a penalty of up to £300 or 5% of the tax liability, whichever is greater. Since the new rules cover trusts without a tax liability, HMRC has said it will consult on a suitable replacement penalty framework in a further technical consultation due later this year. Previous guidance also did not confirm the situation for trusts created between 11 March and 31 March 2020, but WAY predicted this would also be clarified in the later consultation.

The changes are all part of the implementation of the Fifth Anti-Money Laundering Directive (5MLD), which is designed to take further steps to tackle the use of the financial system for money laundering and terrorist financing. 5MLD came into force on 9 July 2018, with an implementation deadline of 10 January 2020. The government has previously said it is committed to adopting the legislation even following any Brexit outcome, and ran a consultation from 15 April to 10 June 2019 on the transposition of 5MLD into UK law.

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